The ICE-based automobile market is on the verge of converting to electric vehicles, thanks to the Indian government’s ongoing efforts to deepen penetration of the electric vehicle (EV) industry in the country. It has set a target of having 30% of motor traffic run on electricity by 2030.
However, the conversation on electric vehicles inexorably turns to charge infrastructure. Plug-in charging and switching are two potential models being discussed. The majority of electric vehicles on the road today are two- and three-wheelers (e-2Ws, e-3Ws). When it comes to charging infrastructure, physical space in metropolitan areas is a persistent stumbling block, necessitating strategic decisions.
In this blog, we will understand the battery swapping business model in India in 2022.
Challenges in battery Swapping
What is battery swapping?
EV users can use battery switching, also known as battery-as-a-service, to replace drained batteries with charged ones at swap stations. The owner can replace the battery with a fully charged one when it is discharged. This will handle the issue of installing charging stations as well as drivers’ range anxiety.
Furthermore, battery leasing can assist EV owners to save money on battery purchases. In comparison to charging at a battery station, which might take hours, the service is faster and takes only a few minutes. It also necessitates the bare minimum of infrastructure.
How does battery swapping work?
An EV owner can visit any energy operator outlet to lease charged batteries when they run out and pay for the electricity used. The system is comparable to how LPG cylinders are used by consumers.
The energy company buys batteries in bulk and install charging stations to recharge the batteries that have been drained. The time it takes to replace a battery is comparable to the time it takes to refuel an ICE car. ICE vehicles, on the other hand, maybe refueled at any gas station, whereas EV owners will need to sign a contract with a specific energy provider to swap batteries and visit their outlets regularly.
What incentives government provide for this business?
The Government of India (GOI) provided financial support for both EVs and public charging infrastructure through the Faster Adoption and Manufacturing Hybrid and Electric Vehicles (FAME) II policy, which saw a budget outlay of INR 10,000 crore. To decrease the high upfront cost of automobiles, the Government of India has announced the sale of e-2Ws and e-3Ws without batteries. However, there is some uncertainty as to whether or not a person is eligible for a subsidy.
More so because the GST on batteries sold separately is still 18%, whilst the GST on EVs is only 5%. Meanwhile, several state governments have taken steps to encourage battery switching and plug-in charging. The Delhi government, for example, recommended a 50:50 subsidy split between the vehicle owner and the energy provider.
How Govt is pushing Battery Swapping to promote the EV adoption in India?
It also announced the distribution of land for the development of swap points at a low-cost rental lease and the repayment of 100 percent of the State Goods and Services Tax (SGST) on advanced battery purchases.
Why this business is important?
The low-cost e-2Ws are cheaper than petrol-2Ws and e-3Ws, and e-rickshaws are more economically viable than their Internal Combustion Engine (ICE) equivalents. High vehicle utilization has been proven to boost EV economic viability, implying a major business opportunity for both e-3Ws and e-2Ws in commercial applications including last-mile deliveries and connectivity.
Original Equipment Manufacturers (OEMs), vehicle aggregators, and other charging infrastructure operators are establishing a dense network of charging points to alleviate the anxiety associated with the lack of charging infrastructure. Because of their lower power requirements, the majority of India’s existing public charging infrastructure is better suited to the four-wheeler (4W) sector, leaving ev-2Ws and ev-3Ws with little use.
Plug-in charging takes a long time and can affect a vehicle’s operational efficiency in commercial applications.
Furthermore, fast battery plug-in charging can cause rapid battery degradation, resulting in a reduction in battery life. Battery-swapping emerges as a viable alternative in this case, as it provides a similar refueling experience to ICE vehicles while lowering the vehicle’s high upfront cost by 40-50%. During battery switching, the depleted batteries are also charged in a controlled environment, extending battery life and reducing safety issues.
A transition to electric vehicles provides India with a lucrative chance to minimize its carbon footprint, which may be further enhanced by incorporating renewable energy into the EV sector.
Used electric vehicle batteries with 70-80% of their original capacity can be repurposed for use in fixed applications such as solar-powered battery swapping stations and mobile energy storage applications. The exchanging market in India is expected to earn USD 6.1 million in sales by 2030, representing a 31.3% CAGR during the forecast period (2020–30).
The majority of e-2Ws on the market now are equipped with detachable batteries that may be charged through plug-in or battery-swapping.
A user can rent an e-scooter from Zypp, a Gurugram-based start-up, for Rs. 109 per day to Rs. 3,600 per month. The vehicle has a range of up to 75 kilometers and costs Rs. 10 for a single switch.
Consumers must pay Rs. 220 for a single e-rickshaw switch and Rs. 400 for additional swaps within 24 hours for the same e-rickshaw. The company will bear the cost of twin Li-ion batteries (each unit is 1.5 kWh) per e-rickshaw, which is Rs. 60,000–65,000, and the driver will only have to pay a usage fee of Rs. 350–450 per swap, which usually provides a driving range of 50–55 km, under Bharat Petroleum Corporation Limited’s (BPCL) “e-drive initiative.”
Battery swapping has the potential to be the most cost-effective solution for efficient rapid charging infrastructure, particularly for commercial fleet operators in India’s e-2W and e-3W segments, which have high vehicle use during working hours. Additionally, including the second-life application of old EV batteries into Battery Swapping Station (BSS) business models might provide an additional source of revenue. Although several states have previously taken measures to include battery swapping in their EV rules, the federal government’s policy remains unclear.
The following are some strategies that can aid the battery swapping model’s expansion in India:
- Battery swapping could be eligible for the FAME 2 subsidy, which would lower the cost of batteries (including lowering the GST on EV batteries from 18% to 5%) and charging infrastructure for energy suppliers.
- The government must strive toward the standardization of batteries for the e-2Ws and e-3Ws to enable their deeper penetration into the market and eliminate friction between the vehicle OEM, battery provider, and BS service provider.
- To maintain consumer confidence, BS service providers must place a high priority on the dependability and safety of swappable battery packs. The government can help with the creation of rules for battery safety and reliability.
If you have any doubts about battery swapping business, you can contact All India EV